THE ON-DEMAND MEAL DELIVERY REPORT: Sizing the market, outlining the business models, and determining the future market leaders

Pizza chains have long dominated meal delivery, but digital
platforms are now enabling the entire restaurant industry to plug
into online delivery. In the dominant on-demand meal delivery
model, platforms like Grubhub serve as a middleman that connect
people to food using the scalability of the internet.

Although some industry leaders are processing hundreds of
millions, even billions, in annual food sales volume already,
they're a drop in the bucket in terms of the total addressable
market (TAM) for food delivery, which is valued at $210 billion,
according to Morgan Stanley Research estimates.

Companies are adopting diverse business models in the market to
deliver these meals; some, like Postmates, are focused on the
logistics of delivering food, while end-to-end providers like
Sprig cook, facilitate ordering, and deliver the food themselves.
Ultimately, order-focused platforms like Grubhub/Seamless and
Eat24 appear to hold the strongest positions in the market. The
former controlled an estimated 59% of total order volume in 2015,
while Eat24 held an estimated 7% share. Moreover,
Grubhub/Seamless could pose a threat to the logistics companies
DoorDash and Postmates if it pushes further into proprietary
delivery services, especially in markets its competitors haven't
expanded to yet.

Despite varying advantages and disadvantages, all
stakeholders will have to navigate some challenges in the market,
including cooling deal volume, consumer resistance to delivery
fees, potential industry consolidation, and downward pressure on
take rates, which measure the revenue a company actually earns
out of the volume they process.

A new report from BI Intelligence sizes the market for
on-demand meal delivery, outlines the main business models,
assesses which key players are in the best and worst position in
the market, and also analyzes the underlying risks that all
stakeholders will have to navigate.

Here are some of the key
takeaways:

There is a massive unfulfilled market opportunity. As of
2015, about $210 billion worth of food is ordered for
delivery or takeout on an annual basis in the US, according to
Morgan Stanley Research. But two of the industry leaders,
Grubhub/Seamless and Eat24, generated a combined $2.6 billion in
food sales last year. This means the market is underpenetrated
but massive, which will incentivize continued competition and,
potentially, an influx of new entrants.

There are three main business models that companies
adopt. The dominant business model so far has been platform
aggregators whose primary function is to support online orders.
These include Grubhub/Seamless and Eat24, which control a
combined 66% share of the market so far. Other models include
delivery-focused logistics models and full-service models in
which companies cook the food themselves.

There are a number of risks that all players in the ecosystem
will have to navigate. SpoonRocket, a once promising
full-service delivery provider, shut down earlier this year in
the face of insufficient capital and intensified competition.
This, along with cooling deal volume, could signal upcoming
consolidation in the industry. Other risk factors include
consumer resistance to delivery fees and lowering take
rates, which measure the revenue a company actually earns
out of the volume they process.

In full, the report:

Overviews the on-demand meal delivery market and quantifies
the opportunity for expansion.

Explains the three main business models meal delivery
companies adopt.

Runs through the main competitors in the market and assesses
which are in the best position to succeed.

Identifies the underlying market risks and how they might
disproportionately affect certain types of competitors.

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